Perhaps just in time to sway the Bank of England Monetary Policy Committee in deciding to up rates again when they meet this week, the Halifax has reported another big jump in house prices for the last month. It claims that prices increased by 2.2% in May, taking the average UK house price to £157,849 and the current level of annual inflation to 20.4%.

The headlines of their report were:

• Strong housing demand, together with supply shortages, have maintained house price inflation at a high level this year. The market has remained very strong in northern England and Wales, in particular, and house price inflation in the south has picked up this year following a significant slowdown during 2003.
• We expect the housing market to begin to slow later in the year and into 2005. The cumulative effect of the increases in interest rates since November alongside other potential increases this year should constrain housing demand. The increasing difficulties that face aspiring first-time buyers should also exert downward pressure on housing demand, including in the north where there has been rapid house price growth in recent years.
• Recent official figures show that the number of private sector new houses completed in England in the first quarter of 2004 was 3% lower than in the same period of 2003. Whilst housebuilding has risen from the low levels of 2001, the number of properties being built is well below that required to keep pace with the rise in the number of households. This is contributing to the upward pressure on house prices.

Commenting, Martin Ellis, Chief Economist, said:

"House prices increased by 2.2% in May, confirming the ongoing strength of the housing market. Strong housing demand, together with supply shortages, is maintaining house price inflation at a high level.

The market has remained very strong in northern England and Wales so far this year and house price inflation in the south has picked-up following a significant slowdown during 2003. We expect the north and Wales to continue to outperform the rest of the country over the remainder of the year, resulting in a further narrowing in the north/south divide.

Higher interest rates and the increasing difficulties that face aspiring first-time buyers should, however, exert downward pressure on house price inflation later in the year and into 2005, including in the north where there has been rapid house price growth in recent years."